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The Time Value of Money

Calculations of the Time Value of Money

1) You invest $20,000 today, at a rate of 10% compound quarterly. What will the investment be worth at the end of year twenty? 2) You are offered an annuity that will pay you $9,000 at the end of each of the next 10 years. What is the maximum amount you would be willing to pay today for this annuity? (Assume you require a

Equivalent Annual Rate

I have a discussion that deals with exercises in determining Equivalent Annual Rate (EAR.) This is closely related to the time value of money and deals with how the frequency of compounding of the interest rate affects the value calculation. The result is not the same when interest is compounded quarterly, for example, as it is

Analyzing Capital Investments

Visit the website of Johnson Controls Inc. located at, and review its 2012 financial forecasts. According to the forecasts, Johnson Controls will increase capital investments to approximately $1.7 billion. More than 70% of the company's capital expenditures in 2012 are associated with growth and

Discounting future cash flows for impairment

Please discuss the issues of discounting and not discounting future cash flows for impairment and how it impacts the calculation of impairment as well as how this calculation impacts the balance sheet. Additionally, are there ethical considerations related to discounting of future cash flows for impairment?

Finance: Evaluating Value

Part I Deliverable Length: 500-700 words Understanding how to properly value a vanilla bond is essential for finance. Find a company with debt and that pays dividends. You can use the following stock screener to find a company: Add the criteria of long-term debt to assets to

Calculate gearing using ordinary share, preference share and debt finacing

I need guidance on how to calculate gearing using ordinary share, preference share and debt financing and also how to evaluate and make a recommendation on which to use. - Gearing is the relationship between debt and total equity included in the capital structure of a firm. The two items are different due to their characte

The Time Value of Money in Economic Decisions

Hi, Please explain why the time value of money is important in an economic decision and how NPV and payback period are used in business to incorporate the time value of money into operational decision. Explain the three basic concepts that are used for estimating the cost of ownership for a single option or in comparing multi

Calculating Time Value of Money

Your annual salary is $100,000. Every year for the next 30 years you plan to save 10 percent of your salary and invest it in the stock market at an expected return of 9 percent per year. 1. How much will you have in your account at the end of 30 years if your salary grows at 4 percent per year? 2. How much can you withdraw e

Kiddy Toy Corporation: Present Value

Scenario: Kiddy Toy Corporation needs to acquire the use of a machine to be used in its manufacturing process. The machine needed is manufactured by Lollie Corp. The machine can be used for 10 years and then sold for $10,000 at the end of its useful life. Lollie has presented Kiddy with the following options: 1. Buy machine.

The Time Value of Money

1. You have been approved for a $70,000 loan toward the purchase of a new home at 12% interest. The mortgage is for 30 years. How much are the approximately annual payments of the loan? Hint: Assume you pay yearly. 2. First Choice Bank pays 9% APR compounded quarterly on its business loans. National Emerald Bank pays 13% APR c

Calculating present value and future value

Find the future value one year from now of a $7,000 investment at a 3 percent annual compound interest rate. Also calculate the future value if the investment is made for two years. FV one year FV two years Sum of FV's Find the future value of $10,000 invested now after five years if the annual interest rate is 8 percent

Estimating Debit Cost of Capital

What are the two methods for estimating debit cost of capital, and what do you do when there is default risk? Explain the circumstances in which you would use each method. Give examples.

Baird Bros. Construction: Time Value of Money

Baird Bros. Construction is considering the purchase of a machine at a cost of $125,000. The machine is expected to generate cash flows of $20,000 per year for ten years and can be sold at the end of ten years for $10,000. Interest is at 10%. Assume the machine would be paid for on the first day of year one, but that all other c

Fundamental Economic Questions

My son has just started his college career with a major in economics. He is curious as to the interrelationship between the success of an economy and the financial markets, concepts, and financial institutions. Accordingly, he has developed a list of questions addressing these issues. What are the financial markets and what p

Time Value of Money: Taking a Risk

Time Value of Money: Time Value of Money is one of the most important concepts in the financial world. The principles of time value analysis have many applications, ranging from setting up schedules for paying off loans to decisions about whether to acquire new equipment for a company. Time value of money is also called discount

Time Value of Money Definitions

As a financial manager you will often have to compare cash payments which occur at different dates. To make optimal decisions, you must understand the relationship between a dollar today [present value] and a dollar in the future [future value]. Future value is the amount to which an investment will grow after earning interes

Problem Set : TVM Concepts

1. (Monthly compounding) If you bought a $1,000 face value CD that matured in nine months, and which was advertised as paying 9% annual interest, compounded monthly, how much would you receive when you cashed in your CD at maturity? 2. (Annualizing a monthly rate) You credit card statement says that you will be charged 1.0

The Future of Managed Care: based on a comparison to traditional healthcare delivery systems using cost, quality, and access to care. It also includes a comparison to healthcare in another country.

Describe what you see as the future of managed care. Base your assessment on a comparison to traditional healthcare delivery systems using cost, quality, and access to care. Include a brief section that provides a comparison with a care system in another country. Feel free to use your previous evaluation of managed care models,

Future Quotes

Please refer to the attached chart. Suppose you sell nine March 2009 silver futures contracts on February 12, 2009, at the last price of the day. Question: (a) What will your profit or loss be if silver prices turn out to be $14.61 per ounce at expiration? Input the amount as positive value. Round your answer to the nearest

Facing the Workforce of the Future

The diversity of the U.S. population has changed significantly over the past decade, and more shifts are expected over the next 20 years. Some examples include: 1) Construction firms are employing a large number of Hispanic/Latinos and they must adapt their recruiting, training, and safety practices to reflect this diversity in

Savings, Investment and Opportunity Cost: Purchasing a Corvette

Choose an asset you would like to purchase in 5 years. Calculate how much you need to save for the next five years to purchase this asset using the following website: Base the interest rate on the five year interest rate from the Treasury department:

Financial Management and Retirement Planning

1. Carry out the transactions indicated in the "action" columns for each account, and create a table (using the exhibit format as a guide) for the surviving accounts. 2. If the Trudeaus retire at age 60, how much wealth will they have built up, given the strategy outlined in exhibit 4? What if they retire at age 67 1/2? For

Investment oppportunities

If investors agree on the amount, timing, and certainty of after-tax cash flows associated with an investment proposition, and if they have the same opportunity cost of capital, would they generally place the same investment value on the property? Explain your answer.

Economics of Engineering:Time Value of Money Concepts

1. What is the present value of $2000 a year for 10 years at 12% compounded annually? 2. What series of equal (uniform) payments is necessary to repay the following present amounts? a. $500 in 5 years at 10% compounded annually with annual payments? b. $10000 in 15 years at 10% compounded annually with annual payments. 3

Time Value of Money Problems

1. Investments in the stock market have increased at an average compound rate of about 5% since 1905. It is now 2012. a. If you invested $1,000 in the stock market in 1905, how much would that investment be worth today? b. If your investment in 1905 has grown to $1 million, how much did you invest in 1905? 2. If the i

The Future of Public Administration in the US

I need assistance with the following questions. Please provide any references used. 1. Identify and explain how the current economic climate might dictate the major themes of public sector management going forward. 2. Based on what you know about current events, analyze and take a position on the future of public administ

What are the future benefits companies derive from these costs?

What are the future benefits companies derive from these costs? Actual return on plan assets is the earned amount on the return by the accumulated pension fund assets in a particular year that is relevant in measuring the net cost that goes to the employer for contributing to the employees' pension plan. Amortization of unrec